Insulin is way too expensive. California has a solution: Make its own.
“There are few better emblems of the failures of the US system of medical care than its inability to consistently provide insulin to Americans who need it.
The drug was discovered 100 years ago, and it provides essential and ongoing treatment for millions of people living with diabetes, one of the most common chronic diseases in the country. And yet one in six Americans with diabetes who use insulin say they ration their supply because of the cost. Some people end up spending nearly half of their disposable income on a medicine they must take to stay alive.
Though insulin generally costs less than $10 per dose to produce, some versions of the drug have a list price above $200. This is in part because, in the US, a warped market has allowed three companies to dominate the insulin business.”
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“With California leading the way, a handful of states are considering trying to disrupt the market for essential medications, starting with insulin. The plan would be to manufacture and sell insulin themselves for a price that is roughly equivalent to the cost of production.”
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“Medicare, the federal health insurance program for seniors, is about to institute a $35 per month cap on insulin costs for its beneficiaries, a provision of the Inflation Reduction Act that Democrats passed last year. But, because of the Senate’s arcane rules, they could not establish the same cap for private insurance, which covers more than half of Americans.”
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“The main mechanism the US has for bringing down prescription drug prices is allowing generic drugs to compete with brand-name versions. When a company develops a new drug, it gets a period of exclusivity, 10 years or more, in which it is the only one able to make or sell that drug. But after that exclusivity period has passed, other companies can make a carbon copy and sell it at a lower price. Studies find that once several generic competitors come on the market, prices drop significantly.
But pharma companies are savvy about finding ways to extend their monopolies, with insulin and other drugs, by making minor tweaks to the chemical compound and asking for a patent extension. In the case of insulin, the companies can also modify the delivery device to protect their market share. Each product is meant to be used with specific, company-designed injectors. Though the patents on the artificial insulin developed in the 1990s have started expiring, these companies continue to hold and extend monopolies on either their devices or other chemical compounds, making it harder for generic competitors to enter the market.
Other federal regulations have added to the challenge. The FDA began to treat insulin as a biologic drug in 2020 — meaning it is made with living materials instead of combining chemicals like conventional pharmaceuticals — which comes with a different set of standards for generic versions, which are known as biosimilars, as well as manufacturing challenges given the precise conditions these products must be made in. Biosimilars can cost up to $250 million to produce and take up to eight years to bring to the market, versus a one-year investment of as little as $1 million for conventional generics. And unless the FDA recognizes a new generic insulin as interchangeable with the products already on the market, health insurers might not want to cover it and doctors may not be willing to prescribe it.
To add one more layer of difficulty, the current manufacturers can always decide to drop their prices to crowd out new generic competitors, given the gap between the retail price and the $10 cost of production. The first biosimilar drugs have come onto the market in the past few years, but only one of them has been deemed interchangeable with the brand-name version; ultimately, in late 2021, it was priced at only $20 less than the brand-name insulin it was competing with. More competition is needed to meaningfully depress prices.”
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“If manufacturing a cheap generic insulin proves viable for California, the consequences could be enormous and stretch far beyond insulin. California would provide proof of concept, and a fledging public marketplace for public pharmaceutical production could potentially emerge.”